27 Mar 2018 laia

Local industry-first specialist risk report reveals huge exposures for SA businesses

Over 56% of South African business owners believe that they still do not fully understand their obligations under the new Companies Act, according to a recent survey by SHA Specialist Underwriters.

Citing some of the key findings of the 2018 SHA Specialist Risk Report Gareth Beaver, CEO of SHA says that this is a worrying statistic, as well as the fact that 52% of the businesses surveyed did not yet have any form of directors and officers (D&O) insurance in place. “From a personal liability perspective, this places the director’s physical and financial assets at risk.”

Beaver explains that this survey is the first of its kind in South Africa, compiled from data submitted by 200 business owners and 350 brokers. The survey also revealed other important facts that business owners, directors and board members need to urgently be made aware of. “Prior to this research, there was little to no publically available information on whether South African businesses are actively insulating themselves against liability risks. This report however shows that this kind of information is definitely valuable.”

According to Beaver, the SHA Specialist Risk Report reveals crucial data about general liability, cyber liability, as well as professional indemnity.

SA businesses are still unprepared for cyber risks

Beaver states that 38.5% of the business leaders surveyed had experienced a network security breach, such as hacking, virus or ransomware over the past 12 months. It is perhaps even more alarming to note that in spite of this figure, very few businesses had proper network security measures in place.

“The brokers surveyed by SHA corroborate these findings as well. Around 74% said that they had difficulty convincing their clients that cyber insurance is important to their business, and 30% of brokers confirmed that they do not even try to sell cyber insurance to their South African clients.”

Beaver adds that while the survey indicates that over a third of local companies do realise that they have an exposure to cybercrime, the feedback from the broker survey suggests that their clients still do not believe that cyber liability insurance is a necessary expense.

“Brokers and insurers therefore have a key role to play in further educating the public about cyber risks whilst highlighting the minimum underwriting requirements that are expected of companies to mitigate their exposures.”

Employee injuries still not a priority in many companies

Beaver says that around 40% of respondents said that their companies are not registered with Compensation for Occupational Injuries and Diseases (COID).

“This statistic is particularly concerning as registration is a legal requirement for all South African companies. Furthermore, it seems that only around 55% of the business leaders registered with COID actually buy additional Personal Accident cover. This statistic is higher than we expected, but it still means that there are many business owners, directors and board members who still need to be made aware of the vital part that Personal Accident cover can play in protecting a company’s balance sheet in the event of an accident.”

Professional indemnity liability is becoming increasingly important

Beaver points out that 20% of insurance brokers had processed professional indemnity claims in the past 12 months. “Essentially it means that one in five brokers have seen at least one of their clients being taken to court over disputes involving their professional services.”

He adds that the subject of professional services has also become more complex in many industries, due to changes to legislative requirements, industry codes, or South African National Standard (SANS) codes and compliance requirements.

“What may have been considered a specialised service (rather than a profession) a few years ago, could now have specialised to the point of professionalization, bringing with it a need for proper PI insurance. Around 57% of the business leaders surveyed have contemplated the possibility that their professional exposure could be insured, and there is clearly a lot of opportunity for brokers to educate their clients about available options.”

Beaver says that the report will become an annual activity for SHA going forward. “This platform not only enables us to share vital industry insights with our customers and brokers, but also provides us with a better understanding of the risks and problems facing South African businesses and the financial services sector as a whole,” Beaver concludes.

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